Why work with an International Export Trading Company?

January 3, 2022

Exporting provides numerous advantages and opportunities, including:

·      Access to a larger number of consumers and businesses. If you only do business in this country, you may be limiting your total potential profits from opportunities to expand your business globally.

·      Diversifying market prospects so that, even if the native economy falters, you can still offer your goods and services in other rising areas.

·      Increasing the lifespan of mature products. If the domestic market for your goods and services appears to be saturated, you can introduce them to new markets in other parts of the world.

·      Potential financing help from U.S. government agencies in the form of loan guarantees can assist in funding your exporting initiatives.

What Is the Definition of an International Export Trading Company?

ETC is a company that collaborates with other companies in the exporting industry. Even if the export company formed it, the ETC operates independently of the company for which it provides services; it effectively functions as another branch of the business. These businesses offer services that aid in exporting, such as warehousing, billing, and shipping.

Export trading companies can handle a variety of other aspects and many of the processes involved in actual exporting. They may act as a sort of intermediary, generating business for exporters or gathering relevant marketing information. Many ETCs will also cover the legal requirements, such as ensuring the exported goods and dealing with the legal requirements of International Trading Company.

Most exporters do business on a global scale, and having an export trading company that can handle interpreting and negotiating the various laws and regulations can save time and effort. Depending on their geographic location, some businesses will deal with different export companies. They may even have a separate export company for each country to which they export goods. This is mostly done in larger exporting firms.

In general, export trading companies operate in one of two ways. Most ETCs are distinct from the companies that do the actual exporting, though there is some overlap. They function as another company client and charge a fee for their services, either flat rate or commission.

An export trading company that the producers of the exported goods form is another type of export trading company. Depending on the nature of the creating company's business, these types of groups can be formed to focus on a single industry or numerous. These types of export companies are sometimes formed by different groups that sell the same product. Even though they may be competing for a market share, they can save money by sharing costs with other producers, a cost that would be much higher if handled by an independent export company.

The terms export trading company and export management company are frequently used interchangeably. However, there is some ambiguity here because many people interpret them differently. The main distinctions between definitions can be boiled down to function. Export management firms are typically associated with the marketing side of the business. In contrast, while capable of handling marketing duties, export trading firms are typically associated with the process of moving and storing the product. For all intents and purposes, the terms are interchangeable.

Congressional Act Related To Export Trading Companies

The globalized economy has resulted in increasingly intense competition from foreign suppliers in the export market. Furthermore, U.S. firms are currently subjected to unprecedented levels of competitive pressure. Congress enacted the Export Trading Company Act (ETCA) to allow U.S. firms to collaborate with one another to reduce export costs, become more efficient at exporting, and, as a result, compete more effectively in the export market. The Export Trade Certificate of Review is administered by the U.S. Department of Commerce's Trade and Economic Analysis Office. These programs have already benefited thousands of American businesses.

The Export Company Trading Act of 1982 permits commercial banks to operate as export trading companies and to own ETCs. Investors can learn more about ETCs by visiting the International Trade Administration of the United States Department of Commerce. Due to Chinese conglomerate e-commerce companies such as Alibaba, which allow business owners to drop ship products directly from their supplier to the customer, export trading companies are not as prominent as they once were.

The Benefits of Using a U.S. Export Trading Company

·      Local Expertise

An ETC provides valuable information about a foreign country's local laws and regulations. An ETC, for example, may provide information to a company about a country's local taxation and copyright laws. ETCs have international market contacts as well, such as relationships with manufacturers and distributors. An ETC can help a company enter a new overseas market by facilitating communication between the parties.

·      Reduces the cost of training and recruitment

Although ETCs charge a fee for their services, it is frequently less expensive than training or recruiting employees in a foreign market. ETCs enable a company to get up and running quickly by speaking with people who already know to answer complex questions.

·      Currency Conversion

ETCs also advise currency hedging strategies to help reduce exchange rate risk. For example, an ETC may advise a company that earns a significant portion of its revenue in Europe to use currency forwards to lock in a future exchange rate for the purchase or sale of euros.

Limitations

·      Loss of Control as a Result of Using an International Export Trading Company

If an ETC handles critical functions such as logistics, billing, and communicating with foreign suppliers and manufacturers, it may lose control of its operations. If key personnel at the ETC resign or the ETC goes bankrupt, the company that hired them may be unaware of the procedures and processes in place.

If an ETC handles a company's marketing functions in a foreign market, the brand that the company is attempting to convey may be distorted. For example, customers may associate an ETC brand with low-quality products if the company runs low-quality print advertisements.

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